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Yesterday, after long negotiations, Athens and its creditors reached an agreement in order to get the hurdles in banks' recapitalisation out of the way. The two sides now see eye to eye on how the tenders for primary homes will be carried out, as well as on the 48 required measures in the first package, as Finance Minister Efklidis Tsakalotos said on his way out of the negotiation room.

However, the two sides failed to agree about the new bad loan management scheme. There are details, which have yet to be dealt with in this area. However, given the likelihood of problems in the bank recapitalisation process arising from negative vibes from the negotiations, the two sides agreed that the issue will be finally settled in December. This is when a bill will be proposed about which loans might be sold to foreign investment funds, i.e. whether it will be just corporate, or housing and consumer loans as well. Business loans will be subject to a size limit, and will also be qualified according to which sector of the economy they originate from.

With this exception, the two sides managed to thrash out an agreement on all outstanding issues yesterday evening. The Eurogroup (Euroworking Group) is meeting this morning, to establish whether the agreement covers all necessary Greek commitments or whether it needs amendments prior to the bill's submission in parliament. The latter will also be done today, so that it can be passed by Thursday evening.

Unless some glitch arises, the Eurogroup will reassemble on Friday (that meeting has been planned anyway) and will most likely greenlight the €2 billion tranche, which is then going to be disbursed on Monday. As far as the €10 billion sitting in a special account of the European Stability Mechanism (ESM) and intended for the recapitalization of Greek banks are concerned, it is not yet clear when this sum will be discharged. Prior to that, banks' bids will have to be lodged and their capital needs to be determined; only then will Greece be able to withdraw the funds it really needs.

Although a round of negotiations ended yesterday, another immediately starts. On Wednesday, the creditors and the Greek government will start talks about which measures the second package will involve. If implemented, this package will lead to the release of the next 1 billion tranche, and practically will flag the end of the creditors' assessment. Yet this package is expected to include the toughest measures: it is highly likely that the government will have to proceed with the changes in the social security system, taxation, the single payroll in the public sector, the build-up of the new privatization fund as well as with other tough measures.

Primary home foreclosures

According to government sources, Athens and its creditors have agreed the following points on the issue of first home foreclosures:

-       Protection of vulnerable social groups, constituting 25% of borrowers, based on the following criteria: a) a tax assessment of the first house up to €170,000, regardless of marital status; b) a declared annual income of €8,180 per person, €13,917 for two people, and €3,361 for each child (for up to two children). Therefore, the income criterion for a family of four with two children would work out at up to €20,639. In case this category needs assistance, e.g. for the payment of their monthly instalments to the bank, €100 million has been earmarked for 2016 as a government subsidy. In practice, this is the notorious "social safety net".

-       The following has been envisaged for borrowers with higher incomes and more expensive homes, who became unable to repay their loans as a result of the crisis: a) first home tax assessment up to €230,000, regardless of marital status; b) income limits as for the first category, but multiplied by a factor of 1.7. Therefore, the income criterion in this category for a family of four will be up to €35,086, for a single person it will amount to €13,906, for two people – to €23,659, and for each child (up to two children) – to €5,714. This coefficient will be in force until the end of 2018, when it will be reviewed. In all cases, attempts will be made to settle disputes out of court on the basis of the tools included in the banks' Code of Ethics.

Borrowers in the second category, however, will have to meet a few other requirements, which have yet to be specified, such as whether they have hitherto been diligent in the repayment of their loans. It should also be noted that their monthly instalments will be calculated on the basis of their income and properties, estimated per market value rather than based on tax assessment. This instalment will be flat-rated over a period of three years.

Government representatives say that both categories of borrowers, i.e. the poorest 25%, and the remaining 25% to 58%, will see some of their debts forgiven based on the difference between the market price, at which they bought their properties, and their current market value. This question, of course, needs further clarification, as it is directly linked to banks' estimates of their bad debts.

Out of the 1.2 million existing housing loans, 400,013 are in the red. About 170,000 of them have been subject to protection requests under the Katselis law envisaging relief to over-indebted households. But the majority of cases have not been through the court system yet and no decisions have been made on them.